Fitch Solutions study sees policy continuity beyond 2022

President Duterte’s successor will likely continue most of his policies, but the all-out war on drugs and the pivot to China may wane once he finishes his term in 2022, research firm Fitch Solutions said.

In a research note issued on Monday assessing political risks in the country, Fitch Solutions also cited risks that Mr. Duterte—the oldest person to be elected president in the Philippines and is turning 75 this March—may be “forced to step down prematurely due to poor health and this would likely result in political gridlock until the 2022 presidential election.”

With Mr. Duterte missing several summits and meetings due to health issues or tiredness, questions about his ability to govern may continue to circulate, Fitch Solutions said.

But Fitch Solutions stressed that its core view was that Mr. Duterte would remain president until the 2022 elections and make a clear choice over who he deems to be his successor before the election.

“While Duterte has suggested that he does not intend to back a specific candidate, we believe his desire to secure his legacy and protect his interests will mean he chooses a successor. However, given the various factions within Duterte’s support, there is the potential for challenges from within Duterte’s camp,” the research note said.

Initially, Fitch Solutions said the likely successor appeared to be presidential daughter Sara Duterte given her rise as a political force as both Davao City mayor and leader of regional party Hugpong ng Pagbabago (HNP).

Other potential successors include Ferdinand “Bongbong” Marcos Jr. or even Bicol politicians Joey Salceda or Francis Joseph “Chiz” Guevara Escudero, the research firm said, citing hints from the president’s media interviews.

Should Mr. Duterte’s favored candidate win the presidential election in 2022, policy continuity would remain relatively high, the research note said.

“However, Duterte’s warm ties with China and war on drugs are less likely to continue,” Fitch Solutions said.

“Duterte’s favoring of stronger ties with China is an unpopular policy amongst Philippine voters. As such, we believe Duterte’s successor will seek to cool relations with China and court the Philippines’ traditional allies such as the US. Similarly, Duterte’s war on drugs would be scaled back, given resistance domestically and internationally to the campaign,” the research said.

Fitch Solutions said it expected a continuation of Mr. Duterte’s focus on improving social services and logistical infrastructure, noting that the fiscal spending program had helped boost and stabilize economic growth in the Philippines at an estimated average of 6.5 percent in the first four years of Mr. Duterte’s six-year term. The successor may, however, seek to speed up reforms to improve the business environment, which has improved modestly under this term.

A second scenario projected by Fitch Solutions is if Mr. Duterte would appoint a successor who is not acceptable to a faction within his support base. “This could come from his daughter Sara or the powerful Marcos family, were Bongbong to be overlooked. In such an instance, we would see an increase in political friction in the period before the elections, with uncertainty over the direction of policymaking or ability of the next president to find support within the Senate. Were the divisions to widen ahead of the elections, it could create an opportunity for opposition politicians to form new alliances and challenge the incumbent power base,” the research note said.

But if Duterte is forced to step down prematurely, Fitch Solutions said policy gridlock may ensue and Robredo’s presidency may be a “lame duck” term. “For example, the delay in passing the 2019 budget could be repeated under a Robredo presidency, impacting the economy,” it said.

While unlikely, Fitch Solutions said a prospective de facto Robredo presidency may face legal challenges and widespread rejection within the political establishment.

“Following the 2016 vice presidential elections, Robredo faced allegations of cheating by rival candidate Bongbong Marcos. While an initial recount in October 2019 showed Robredo to have a larger victory than initially recorded, tensions remain between the two camps. An attempt by the powerful clans to ignore or reject Robredo’s presidency could effectively nullify policymaking and throw the political establishment into instability,” the research said.

“In such an instance, there could be military intervention if public supporters of competing political clans began to clash. This would result in the most aggressive selloff of Philippine assets by foreign investors of the scenarios listed, with foreign direct investment inflows collapsing. Were this situation to prevail, we would expect the 2022 presidential election to go ahead as scheduled, with control being passed to the elected president.”